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15 June, 09:49

The following information is available for Sweet Dreams Company: Sales $ 175,000 Operating expenses $ 161,000 Operating assets $ 50,000 Stockholder's equity $ 43,750 Cost of capital 11 % What is Sweet Dreams Company's return on investment (ROI) ?

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  1. 15 June, 10:08
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    Sweet Dreams Company's return on investment (ROI) is 28%

    Explanation:

    Return on Investment = Net Income / Investment

    When Net Income = Sales-Operating expenses

    NI = $175,000 - $161,000

    =$14,000

    When Operating Assets = $40,000 as it is also known as Operating Asset

    Therefore Return on Investment = Net Income / Investment

    ROI=$14,000 / $50,000

    ROI=0.28

    ROI=28%
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